---
title: "Bill Rate Vs. Cost Rate"
description: "Understanding Bill Rate vs. Cost Rate: Key Differences Explained"
url: https://support.mosaicapp.com/en/articles/562-bill-rate-vs-cost-rate
collection: "Budget FAQs"
updated: 2026-09-22
language: en
---

# Bill Rate Vs. Cost Rate

Understanding Bill Rate vs. Cost Rate: Key Differences Explained

As a services business, your main product is time. Yet many companies lack real-time visibility into project profitability. Not all project phases or entire projects will always be profitable, but projects should never intentionally be planned at a loss. Mosaic addresses this by providing a clear, visual representation of the cost of time, making profitability per project and organization wide clear and transparent. 

## Bill Rates

Bill Rates reflect the experience level of resources and are typically used for hourly work where fees are determined by hourly rates.

## Cost Rate

Mosaic uses a **Cost Rate** (also known as the Fully Burdened Rate) to clearly show remaining amounts, representing profit when managing project fees.

**Cost Rate Calculation:**

The overhead multiplier conceptually represents how much you must multiply a billable hour to cover costs:

```javascript
Total Overhead Cost/hour = Overhead Rate × Pay Rate
```

For example, if John’s pay rate (salary) is $50/hour, multiply by the Overhead Rate to cover all associated costs.

## Overhead Rate Calculation

```javascript
Overhead Rate = Total Overhead Cost ÷ Billable Project Labor Cost
```

**Billable Project Labor Cost**

Calculate using total payroll cost across the organization multiplied by the average utilization rate:

```javascript
Billable Project Labor Cost = Organization Total Payroll Cost × Utilization Rate
```

**Utilization rate** refers to the percentage of billable hours across the organization (industry average typically around 59%). Mosaic’s **Utilization Report (add help link)** separates employees' billable and non-billable hours clearly.

**Example:**

-   **Total Payroll Cost:** $1,000,000
    
-   **Utilization Rate:** 59%
    
-   **Billable Project Labor Cost:** $590,000
    

**Excluded from Total Overhead Costs**

These pass-through reimbursable expenses are typically billed directly to clients.

-   Consultants
    
-   Reimbursables:
    
    -   Shipping/courier/FedEx
        
    -   Expediting/filing fees/permits
        
    -   Printing costs
        
    -   Material costs
        
    -   Travel
        

**Included in Total Overhead Costs**

All non-billable operating expenses, such as:

-   Rent/mortgage
    
-   Utilities
    
-   Maintenance and repair
    
-   Furniture
    
-   Equipment (computers, printers, scanners, phones)
    
-   Supplies (paper, business cards, software)
    
-   Website costs
    
-   Insurance (general, professional, healthcare)
    
-   Unbilled travel
    
-   Taxes
    
-   Employee benefits (401k, social security)
    
-   Association fees, subscriptions
    
-   Marketing, advertising, business development
    
-   Bookkeeping/accounting
    

Plus non-billable labor salaries:

-   Administrative
    
-   Finance
    
-   Marketing
    
-   Business development
    

Bonuses may be included, though they are often taken out of profit. Where they are included is an organization preference. 

Finally, you’ll need to include billable employees’ non-billable time and PTO. If utilization is 59%, non-billable and PTO would account for 41%.

**Example:**

-   **Non-Billable Labor Cost = Total Payroll Cost × (1 - Utilization Rate)**
    
-   **$1,000,000 × 41% = $410,000**
    

**Total Overhead Calculation:**

```javascript
Total Overhead Cost = Operating Expenses + Non-Billable Labor
$1,000,000 + $410,000 = $1,410,000
```

**Final Overhead Rate:**

```javascript
Overhead Rate = Total Overhead Cost ÷ Billable Project Labor Cost
$1,410,000 ÷ $590,000 ≈ 2.39
```

While overhead rates vary, they typically range between **150% and 300%**.

**Billing Rate Multiplier:**

Your billing rate should factor in desired profit:

```javascript
Billing Rate = Cost Rate × (1 + Profit Margin)
```

If your cost rate is $100/hour and desired profit margin is 20%, the bill rate would be $120/hour.

* * *

This guide helps outline the overhead calculation process clearly. Due to the importance of accurately understanding your business's profitability, we recommend reviewing these calculations with your accountant for confirmation.

* * *

## Budget v. Fee

The **Fee** always remains constant, serving as a fixed amount, while the **Budget** functions as an adjustment factor to either frontload or backload the fees, independent of the actual phase fee structure.

In both **Cost Rate** and **Bill Rate** scenarios, the **Fee** and **Budget** should be the same numbers. The key difference lies in how profit is realized:

-   In the **Cost Rate** view, the remaining budget after the project is completed represents the profit. Alternately you can turn on the setting to have a different budget for Cost and Bill Rates, which would allow you to set up the project where the remaining budget is set to reach zero dollars ($0) or greater, at project completion for a profitable project. 
    
-   In the **Bill Rate** view, the remaining budget is setup to reach zero dollars ($0) or greater, at project completion, the built-in profit margin within the Bill Rates is automatically realized.